Economic Backdrop and Financial Performance Objectives
Commercial Real Estate (CRE): Well-diversified portfolio
■ Total CRE exposure of $85.3BN represents 9.7% of total L&A
■ The portfolio was originated with sound lending standards, and remains well-diversified by geography, business and property type
Impairments and losses
are manageable
The portfolio is well
provisioned
Since the start of the current rate-hiking cycle (Q3/22):
■ Cumulative new formations of impaired loans of $1.35BN represent < 2% of CRE L&A and < 0.2% of Total
L&A
■ Cumulative PCL on impaired loans of $373MM represent 1% of PPPT Earnings
■ The implied loss rate on impaired loans is 28%, as tangible collateral and guarantees help mitigate losses
■ The CRE ACL ratio on performing loans is ~3x higher than pre-pandemic levels and -4x higher in the U.S.
than in Canada
■ Our downside provisioning scenarios account for a reduction in CRE prices of 25% to 40%
Spotlight on U.S. CRE Exposure ($28BN or 3% of total L&A)
Other
1%
U.S. Office (1) Exposure (0.6% of total L&A)
■ 57% of exposure is in Wealth Management,
where loans are typically smaller (average
< US$15 MM) and benefit from amortization
and additional recourse outside of the asset
(e.g. guarantees or other collateral)
■ The remaining 43% is in Capital Markets,
where loans are larger (average
< US$75MM) and exposure is backed by
strong financial sponsors
(1) Office exposure includes traditional office and life sciences buildings.
32 RISK REVIEW
Retail
14%
Office
20%
Industrial &
Warehouse
36%
Multifamily
29%
■ The Office segment continues to be impacted by
supply/demand imbalance and has accounted for a
majority of our PCL on impaired CRE loans since Q3/22
U.S. Multifamily Exposure (0.9% of total L&A)
Segment generally performing well with pockets of
geographic weakness
■ Since Q3/22, provisions on impaired loans have been
largely limited to loans secured by a portfolio of
properties in San Francisco
■ No material exposure to rent-stabilized apartments in
New York
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